Advice From a Founder: Q&A with CloudCheckr’s Aaron Newman
Aaron Newman is a Founder of CloudCheckr, an APN Advanced Technology Partner who services thousands of users and helps manage over $250 million per year in AWS spending. CloudCheckr is the fourth start-up founded by Aaron Newman in the last 15 years. He has engineered successful exits for each of the previous three and is kind enough to share a bit of his insight in building companies and the lessons learned.
CloudCheckr is your fourth startup, but before we get into CloudCheckr, can you tell us a bit about your background and your other three startups?
Sure; I started my career with PricewaterhouseCoopers straight out of college. Although I learned a lot there through my five-plus years, I eventually realized I wanted something more entrepreneurial. So I looked around a found a job with small startup doing security. I was writing code with a few other people and, it being the late 90s, we were quickly sold. From that, I was hooked.
I used my small payout from that first startup to help me bootstrap the first company of my own—DB Secure. As the name suggests, we solved issues around database security. We were small but had strong technology in a hot space. Within two years of launch, Internet Security Systems (subsequently acquired by IBM) came calling and purchased DB Secure.
My second startup was Application Security, Inc. I founded App Sec in 2002. For that, I wrote code out of my basement for 100 hours per week and could not have been happier. Our signature product was App Detective. It provided security for the application layer.
I had left DB Secure thinking that I could have done more with it if we had better funding. Consequently, we raised nearly $20 million at App Sec. I know that does not sound like a lot right now, but you have to remember this was 2002–04, right after the tech bubble burst and money was tight.
What I did not understand, however, was the loss of control and efficiency that accompanied accepting so much financing. App Sec continued to thrive—it grew to over 200 employees on my watch—but I was frustrated. I wanted to pursue my vision, and I also wanted to be “doing” and not “managing.” So I let the VCs (venture capitalists) buy me out in 2006. I remained on the Board of Directors but went on to look for my next venture. App Sec was subsequently purchased by TrustWave.
My next venture was Techrigy in 2007. Here, I moved away from security into social media monitoring. I had seen Twitter and Facebook and felt like it was a growing field. I had learned that going it alone was a tough road, so I brought in a technical partner to help share the load. We both wrote code to get the product started. Techrigy was exceedingly well positioned. The social media field was bursting and everyone wanted to get into the space. By 2009 we had hundreds of customers, and acquirers came sniffing. We sold Techrigy to Alterian PLC. (They were subsequently purchased by SDL.)
By 2011, I was getting the startup itch again. This time I realized that I wanted a nontechnical partner, someone who would manage operations and let me pursue the technical vision. So I approached a friend and founded CloudCheckr. We provide AWS users with visibility into their AWS environment. We make it easier for users to control their spending, track their costs, maintain their security, and generally improve their AWS performance.
Tell us a bit about CloudCheckr. Your general availability launch was only 14 months ago, and yet you have taken the market by storm. You are approaching 20 employees and monitoring hundreds of millions of annual AWS spend. What are the keys to your growth?
Thanks for the compliment. We are trying to keep our momentum going.
For us, our key driver is our technology. We know that we are not going to out-connect or out-market our competition. We have not taken $10 million dollars and have not enlisted brand-name board members. Instead, we focus on building the most robust AWS solution. We “out-technology” our competition.
Where others build thin solutions for multiple vendors, we have honed in on AWS. AWS is the faraway leader in the public cloud space. They own the market, so we want to become experts in that market, where the customers are. That is a really important idea: Do not out-think yourself. Often, the obvious choice is the correct choice. For us, AWS represented the obvious place to find customers—and it turned out to be the correct place, too.
Also, we pay particular attention to customer needs. I know that sounds trite. Everyone claims to be customer friendly with titles like “Head of Customer Satisfaction” and “VP of Customer Success,” but we genuinely mean it. In many ways, we let our customer requests drive our development process.
Amazon itself has also been a key driver of our growth. We have made a determined effort to educate the AWS sales representatives and solutions architects so that they know our capabilities and when we can help them solve one of their customer’s problems—whether the problem be cost, security, audit, or compliance.
We had some fear that Amazon might be leery of us. After all, we are cutting people’s bills by over 30%. But they have embraced us. They recognize that delivering customer service the most important part of business and having people spending more than they should is very poor customer service.
On the internal side, we place minimal value on hierarchy. I may be the CEO and CTO, but I am also the guy who literally takes out the trash and cleans the office. We are as flat as can be; we want the person with the best idea, not the best title, to carry the issue.
Are there some overriding lessons from your experiences? You talk about choosing different partners and delegating responsibilities as you have progressed through startups.
Yes, I think that was a key learning point for me. From DB Secure and App Sec, I realized the importance of having someone to share the load. Even if I could go it alone, it did not make sense to. Having everything run through a single point is workable for a small organization but very counterproductive for a larger one. There is genuine efficiency in a willingness to share authority and delegate tasks. Letting go is hard, no doubt about it. But it is necessary to be successful.
I also learned to focus on a complementary partner. I enjoy the technical aspects, don’t mind sales strategy, but really dislike managing. So I looked for someone who would pick up the slack in those areas. I did not need another technical person; I needed someone who could handle operations. Founders need to make an honest appraisal of their own strengths and weaknesses. Then, to be successful, choose strong people who offer complementary skills.
You expressed some hesitancy about accepting VC funding. That is counter to conventional wisdom. Can you elaborate?
Sure, I do not want to sound overly negative on VC funding — I am not. My point is that, as an entrepreneur, you need to recognize that the money can be a double-edged sword.
With funding you will gain four huge plusses: security, experienced counsel, access, and attention. Each of these can individually be the difference between success and failure.
However, with funding you will have to share control. Depending upon the level of funding and your company vision, that could be minor accommodations or it could be very significant compromises in areas ranging from corporate management to product roadmap to sales plan to exit strategy. You will also be drawn away from a technical role (which is what I enjoy) toward a managerial role. When you take investor money, you take on a responsibility to report to your investors, and you give away a part of your baby.
So if someone does not want to or cannot obtain funding, do you have some advice?
Here is where I think AWS is a tremendous leveler. In the old days, you had to raise money because you had huge capital expenditure costs. AWS has removed that need. Where you needed $2 million to get your servers set and running back in 2000–01, now you can spend a penny per hour and just scale up as your business grows. Money is still important in terms of marketing, but it is no longer essential from a technology standpoint.
Startups should use the AWS advantage. The Activate program is terrific. The AWS webinars and training programs provide deep insight in how to leverage AWS functionality. The social networks, meet-up groups, and question boards are also invaluable. By using these resources, a smart entrepreneur can genuinely bootstrap a startup to where they are taking funding by choice rather than need.
Last question, you chose to found CloudCheckr outside of the major tech hubs of SF, Boston, Seattle, and NYC. Why?
Honestly, the decision was driven by my family and my cofounder’s family. We were both in Rochester with small children, and moving did not make sense. Being here has its good points and its bad.
On the negative side, we miss out on the connections that we would enjoy being in a major tech hub. We have to work harder to connect to customers, and it is more difficult for us to get media attention. I know that this has cost us customers; there is a definite value in being able to meet people in person. We try our best to cope with this disadvantage by traveling regularly. Sales coverage is good, but no one has the passion of a founder. So, either my cofounder or I or both of us make monthly trips to Boston, NYC, SF, and Seattle.
On the positive side, we operate in a very low-cost environment and enjoy tremendous access to talent. For people who are bootstrapping, the rent in a place like Rochester makes it very affordable. And when I think about talent, we have fantastic school here in Rochester. RIT turns out premium software engineers, and we have early access. Our location allows us to choose the best of the best, and this is a huge advantage. For example, we posted a co-op position at RIT and received over 170 applicants!
My message to entrepreneurs is that you do not have to be limited by geography. You just need to recognize the limitations of being outside a tech hub and actively address the issues. Hire sales people and make travel a regular part of your plans.
Thanks you for your time. And good luck with CloudCheckr!
Thanks for inviting me.